One wrong word sinks U.S. Bank’s 20-year Maine foreclosure efforts

In May 2021, U.S. Bank sent the couple a notice under Maine’s section 6111 – the state law that requires lenders to give borrowers an itemized breakdown of what they owe before a foreclosure on a primary residence can proceed. The notice put the total at $189,471.26 to cure the default, broken into four categories. Both sides agreed that the line showing $94,051.69 was labeled “Payments” when it should have said “Principal.” The mix-up traced to $205.92 in late charges from the 2012 judgment that a prior servicer had folded into the principal balance as a non-interest-bearing deferment.

Three months later, U.S. Bank sued to foreclose. The district court ruled against the bank and entered judgment for the wife. U.S. Bank appealed.

It ran three arguments on appeal. The First Circuit turned down all three.

First, U.S. Bank argued that the notice requirement does not apply once a loan has fully matured. If there is nothing left to accelerate and no monthly payments to restore, the bank reasoned, the statute has no work to do. The court disagreed. The statute bars lenders from accelerating “or otherwise enforc[ing] the mortgage” without proper notice, and the court read that language to cover foreclosure on a matured loan. The entire chapter of Maine law where the statute sits deals exclusively with foreclosure. And the court made a practical point: a mortgage creates rights beyond monthly payments, including the lender’s duty to release the mortgage when the debt is paid in full. Borrowers are entitled to know exactly what a lender says they owe before foreclosure moves forward – whether the loan is active or matured.

Second, the bank argued that the wife was not a “mortgagor” under the statute because she never signed the note. The court looked at the 2014 state court ruling, which found that her property interest was subject to the mortgage – effectively creating what both sides conceded at oral argument was an equitable mortgage over her property. If a court has already determined that someone mortgaged her interest in a property, the First Circuit said, it is hard to call her anything other than a mortgagor. The court was careful to limit its holding: not every non-signatory with a mortgage interest automatically becomes a mortgagor. But on these particular facts – where a prior court found the wife’s interest encumbered – the label fits.